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The day's closing numbers are displayed after the closing bell of the Dow Industrial Average at the New York Stock Exchange on July 5, 2018 in New York. (Photo by Bryan R. Smith / AFP) (Photo credit should read BRYAN R. SMITH/AFP/Getty Images)

In Forbes contributor Teresa Ghilarducci’s book, How To Retire With Enough Money, she explains, “On average, Social Security replaces about 40 percent of the income you earned before retiring,” and “it’s up to you to arrange the rest.”

You may have read my recent article explaining that my mother has now officially retired, sort of. She’s been a full-time real estate broker for over three decades and now wanting to slow down, she’s hoping to balance her income spigot from social security and investments, with commissions earned from her now part-time broker work.

There is a much better way to put real estate into your retirement portfolio and to lessen your stress-level so you can sleep well at night.

REITs are terrific stocks for retirees and pre-retirees (and those in-between, like my mom), because they’re high-yielding securities. They are unique to stocks because REITs must payout at least 90 percent of their taxable income, so the yields are oftentimes higher than other equity classes.

Also, because REITs own real estate, buildings are often leased to very stable companies under long-term lease contracts, which make income more predictable and consistent. Since REITs hold valuable assets, dividends getting generated usually grow, just like an apartment building that increases rents every year. And as REITs also grow earnings, that makes for an even more enticing “compounding effect.”

One of the big misconceptions about REITs is that they’re similar to bonds. That’s wrong. REITs generate rental growth as the economy grows - even long-term leases (Triple Net REITs) generate favorable rent growth - which leads to predictable dividend growth.

REITs are now part of the Global Industry Classification Standard (GICS) - the basis for S&P and MSCI financial market indexes, in which each company is assigned to a sub-industry and corresponding industry. For REITs, real estate is one of the primary sectors identified, validating REITs as a “core” food group (so to speak), and no longer an “alternative” asset class.

The Big WHY: Ventas has two of the most important tools in a REIT’s tool kit: scale-advantage and cost of capital advantage. Ventas owns portfolio of more than 1,200 assets well-located in attractive markets with high barriers to entry.

Feathers in their Cap: Ventas avoided skilled nursing risk by successfully recycling assets into more defensive Life Science and Medical Office building properties.

Downsides: Senior Housing exposure generates modest NOI growth.

Performance YTD: +1.3%

Alpha Insider (management update): Ventas has attractive debt (BBB+ rated by S&P) with a war chest for growth (expected to generate $1.25 billion in proceeds from asset dispositions and loan repayments).

Bottom Line: Ventas trades at $59.12 with a P/FFO multiple of 14.4x. The dividend yield is 5.3% and well-covered by earnings (or FFO). It’s rare to able to buy this high-quality REIT at such a discount.

Retirement Pick Number Two: CyrusOne (CONE)

The Big WHY: CyrusOne is one of the most profitable data center REITs that generates impressive returns through development and disciplined capital management practices.

Feathers in their Cap: CyrusOne has expanded in Europe (London and Frankfurt) and has a strategic partnership with China data center landlord, GDS.

Alpha Insider (management update): CyrusOne has generated strong dividend growth with a modest payout ratio (60%). This pullback provides an opportunity for REIT investors to own shares in a high-quality REIT at sound price

Bottom Line: CyrusOne trades at $62.20 per share with a P/FFO multiple of 19.5x. The dividend yield is modest (just 3%) but I expect shares to trade higher as a result of the growth in data, shares could generate total returns of around 15% annually.

Retirement Pick Number Three: Realty Income (O)

The Big WHY: Realty Income calls itself “the monthly dividend company” and this suggests that the company does one thing extremely well: “pay monthly dividends”.

Feathers in their Cap: Realty Income has increased dividends for over 24 years in a row by utilizing its disciplined risk management practices. Realty Income has maintained its #1 position in the Net Lease REIT sector by using its scale and cost of capital advantages.

Downsides: Majority of tenants are retailers, but Realty Income focuses on the necessity-based operators.

Performance YTD: -.10 %

Alpha Insider (management update): Realty Income should continue to benefit from sale/leasebacks with larger corporations. Recently the company acquitted a portfolio leased from 7-Eleven and Realty Income can be competitive given the company’s scale and cost of capital advantages.

Bottom Line: Realty Income shares trade at $55.58 with a P/FFO multiple of 18.5x. The dividend yield is 4.7% and Realty Income is positioned to grow its dividend by 3-6% each year.

Retirement Pick Number Four: Physicians Realty (DOC)

The Big WHY: Physicians Realty is one of the largest owners of medical office buildings (or MOBs) in the U.S. The company has invested in more than $4.3 billion in real estate assets since the IPO in 2013. DOC now has more than 14 million square feet of high quality medical office space with approximately 50% of all of that space leased to investment grade health systems and their affiliates.

Feathers in their Cap: 2017 was a landmark year for DOC with $1.4 billion in total investments, demonstrating the power of DOC’s hospital relationships through the acquisition of some of the highest quality medical office facilities in the country. During the year, DOC integrated over 3.3 million square feet and 260 new tenants to its ownership.

Downsides: Capital has recycled from MOB to other sectors.

Performance YTD: -7.9%

Alpha Insider (management update): DOC’s success is the result of its relationships with the finest healthcare providers in the US, execution, disciplined strategy, an experienced team and superior insight into the future of healthcare delivery in the US.

Bottom Line: DOC shares trade at $16.10 with a P/FFO multiple of 15.0x. The dividend is 5.7% and now covered by FFO and the company has positioned itself to generate steady and reliable growth in the future.

I own shares in VTR, CONE, O, and DOC.

Brad Thomas currently writes weekly for Forbes.com and Seeking Alpha where he maintains “real time” REIT research on many publicly-listed REITs. In addition, Thomas is the editor of Forbes Real Estate Investor, a monthly subscription-based newsletter. Thomas has also been fe...